After the 2015 boom, domestic alternative energy vehicle market has to face the challenge of shrining subsidies in 2016.

 

According to Fiscal Supporting Policies on Popularization and Application of Alternative Energy Vehicles in 2016-2020, all models except from full cell vehicles (FCV) will have a subsidy decrease of 20% in 2017-2018 and 40% in 2019-2020 based on 2016 level, a faster drop than that in the previous exposure draft, which stipulates “Blade Electric Vehicles (BEV) and Plug-in Hybrid Electric Vehicles (PHEV) will have a subsidy decrease of 10% in 2017 on 2016 level and a more 10% in 2019 on 2017 level”. According to the new policy, BEV with range more than 80 kilometers will obtain subsidies in 2015, while the standard will be raised to models with range larger than 100 kilometers in 2016. Besides, for models with range between 100 to 150 kilometers, the subsidies will be 31,500 RMB, while the subsidies will drop to only 25,000 RMB in 2016.

 

Professionals believe that the decrease will result in great impacts to the market. Chen Qingtai, General Director of China EV100 said on China EV100 media talkfest,” Our technology is not mature. Our high sales volume is mainly driven by policies instead of the market. If subsidies are cancelled, the electric vehicle market will be impacted greatly.”

 

China Galaxy Securities points out that, the drop in 2016 subsidies will impact the Q1 production and sales volume. On one hand, the high growth in 2015 Q4 is resulted by local governments’ target pressure and their hurry in taking the subsidies, leading to excessive supply. On the other hand, no significant changes in demand appear. Changes in ranges and costs cannot take place in a short time. The construction of charging infrastructure also needs a time period. The 2015 Q4 rally draws 2016 performance in advance, which may result in the impact.